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Beneficiary Designation: The Greatest Gift You Can Give Your Family

Beneficiary Designation: The Greatest Gift You Can Give Your Family

February 11, 2021

It’s the beginning of a new year and we’re all ready to start fresh. The holidays are behind us and (hopefully) we’re feeling upbeat and renewed and ready to tackle what’s coming. That’s why this is the perfect time to discuss this light topic:


Seriously, I know it’s the last thing you want to do right now, but the beginning of the year is the perfect time to revisit (or establish) your beneficiary designation when it comes to your financial planning. And there’s no better way to get my point across than to give you actual client stories about what can happen if you don’t.


Don’t Let This Be You

I have had clients who didn’t review their beneficiaries and when they died, what they wanted to have happen didn’t.  For example, I had one client who, instead of leaving 100% of her insurance policy to her husband, left 50% to her children.  That’s okay if that’s what you want to do.  However, issues arose after her death when we looked at her financial plan; as a result of the beneficiary designation, the husband had to make significant changes in retirement. (I now ask for all of that paperwork in writing so there are no false assumptions.) 

It’s also not uncommon to find that clients have their beneficiaries listed as their parents or ex-spouse even though they have been remarried for twenty years or their parents are now deceased.  In the most extreme case that I worked with, a had a client whose ex-husband died and left all the money to her.  Needless to say, his spouse at the time of his death was not very pleased. 


How to Avoid an Angry Family

 So, how do we keep our financial legacy squeaky clean within the family? Planning of course!

Work with an attorney

If you have minor children, make sure that you have children’s trusts established.  These are not complicated trusts that take hundreds of pages to create.  They are a paragraph or two that your attorney writes into your will establishing a trust that is formed at your death.

This also allows you to dictate who will handle your children’s money if need be.  Money left to minors should not be left outright to them.  If you don’t leave it in trust, the state will make you. 

The other thing that this allows you to do is to control the money after you are gone – even with adult children.  I have a client who has said to me multiple times, “If the kids get this kind of money at age 20, it’s going to ruin one of them.”  What he means by that is that they will make the wrong decisions, blow through the money, potentially not get the jobs that he would like to see them have with the work ethic that he values.  A trust can help prevent this problem – no matter the age of your child. 

Do it For Your Family

Dealing with a death is tough for survivors.  Take the extra time to make the administration easy for them.  Establish the trust and make sure that it’s listed as the beneficiary on your accounts.  Don’t make your loved ones go through the time and court costs needed to set straight what should have been addressed when you were updating your will. This is not only difficult to do at such an emotional time, it can also reduce the funds you’ve left for them.

Keep Your Plan Current

Check your beneficiaries today, but also make sure that you check your beneficiaries every time you have a significant life change like a death, birth, or change of marital status in your family situation.  Failure to do so can have a significant impact!

Think of it this way: The last thing you want your legacy to be is a happy ex-wife and annoyed current spouse.